25% of buy-to-let landlords surveyed stated that they were actively seeking to purchase new investment property, compared to only 12% who said they were thinking of selling. Furthermore, the percentage of those who stated they were thinking of selling was down by 3% from 15% in May 2005.
These findings signal a recovery in the sector and are a clear sign that buy-to-let investors are returning to the purchase market. This trend is also reflected by the fact that landlords are expecting to grow their portfolio by 17% over the coming 12 months. Overall, landlords expect to hold an average of 8.3 properties in 1 year’s time compared to the current average of 7.1 properties.
Along with the uplift in the number of landlords purchasing new investment property, the number of those remortgaging has increased dramatically to 37% from 23% in January. This confirms that landlords are responding intelligently to the current market environment, and, with the slight increase in swap rates over the last month, numbers of investors remortgaging to fixed rate deals may well increase.
This confidence in the buy-to-let sector comes at a time when rents are recovering and the housing market remains in the buyer’s favour. However, the buy-to-let sector is essentially driven by rental demand, an important part of which is the ever improving attitude to renting. Along with those who rent out of necessity, there are a large, and increasing, number of tenants who rent out of choice. Traditionally, renting was viewed as the domain of students and young house sharers, however, this survey reveals that just 8% and 6% of landlords respectively, cite these tenant types as those occupying the majority of their properties (see Chart 2). Just 17% of landlords stated that their major tenant types were singles living alone, and 41% said the majority of their properties were let to couples. Unexpectedly, 23% of landlords stated that the majority of their tenants were families. These findings show that those renting properties increasingly do so as a lifestyle choice rather than a matter of necessity.
Nicola Severn, marketing manager at Mortgage Trust, concludes: “Although factors such as the performance of the housing market, and interest rate changes undoubtedly affect the sector, buy-to-let is essentially driven by rental demand. Without tenants, buy-to-let would not exist, so it is unsurprising that wider attitudes to renting go hand in hand with the health of the sector. As renting gains popularity and becomes a positive lifestyle choice, so the spectrum of tenant types continues to widen. This creates buoyancy in the lettings business and boosts confidence among investors. Along with a return to investment property purchase, landlords continue to display a keen business sense. They not only have coherent plans for long term investment, but they are also actively remortgaging in order to secure the most favourable buy-to-let finance deals.”
